HAIMEN, China—Nestled among tiny farms in this rural outpost outside Shanghai is a huge, supersanitary chicken farm—a bold bet by Tyson Foods Inc. that it can thrive in China by overhauling a decades-old business model.

Instead of buying chickens from independent farmers, as Tyson long has done world-wide, the company is spending hundreds of millions of dollars to build its own farms in China. The effort is aimed at making inroads in...